Hennes & Mauritz (H&M) is a Europe’s second-largest clothing retailer. Founded 1946 by Erling Persson in Sweden, H&M initially sold women clothing through “Hennes” stores in Sweden. “Hennes” is Swedish and means “for her”. In 1968 the company acquired the hunting apparel retailer Mauritz Widforss, which also offered collections for men, and changed its name into Hennes & Mauritz.
Today H&M offers clothes, own-brand cosmetics, accessories and footwear in over 1,800 stores in 34 countries around the world. H&M employs around 73,000 people and achieved a turnover of SEK 104,041 million in 2008 (H&M, 2008). H&M’s extensive product line can be broadly categorized into: women, teenagers, men, children, accessories and cosmetics.
H&M strives for constant expansion targeting 10-15% growth of store numbers annually to leverage its core competencies. 214 stores were added in 2008 and 225 new stores are planned to be added globally in 2009. In exceptional cases like the Middle East and Kuwait, H&M has entered through franchise operations. However, wholly-owned subsidiaries are the preferred mode of entry to keep full organizational control of foreign subsidiaries (H&M, 2008).
This study aims to identify a market that suits H&M’s successful business model and offers an attractive opportunity-risk relation. For this purpose we firstly need to understand the business model and core competencies of H&M. Secondly, two alternative markets are selected for a country screening process. Thirdly, risks and opportunities inherent to their economic, political & legal, socio-cultural, and market forces are assessed and finally a recommendation under consideration of key success factors is made.
Table of Contents
1. INTRODUCTION
2. THE BUSINESS MODEL
3. EXTERNAL ANALYSIS
3.1 Initial Screening
3.2 Financial & Economic Forces
3.2.1 Japan
3.2.2 South Korea
3.3 Political & Legal Forces
3.3.1 Japan
3.3.2 South Korea
3.4 Socio-cultural Forces
3.4.1 Japan
3.4.2 South Korea
3.5 Market Forces
3.5.1 Japan
3.5.1.1 Demand Analysis
3.5.1.2 Competitive Analysis
3.5.2 South Korea
3.5.2.1 Demand Analysis
3.5.2.2 Competitive Analysis
3.6 Final Selection
4. RECOMMENDATION
Project Objective & Themes
This project aims to evaluate and select the most suitable Asian market for H&M's global expansion. By conducting a comparative market screening of Japan and South Korea, the study assesses economic, political, legal, socio-cultural, and market-specific risks and opportunities to provide a strategic recommendation for market entry.
- Analysis of H&M's fast-fashion business model and core competencies.
- Comparative economic and financial assessment of Japan and South Korea.
- Evaluation of political barriers and legal frameworks in target markets.
- Examination of consumer behavior and socio-cultural trends.
- Competitive analysis using Porter's Five Forces model.
Excerpt from the Book
THE BUSINESS MODEL
H&M is the pioneer of ‘fast-fashion’: “a term used to describe clothing collections based on the most recent trends on the catwalk, but designed and manufactured quickly, affordable, and aimed at mainstream consumers” (Research and Markets, 2006). This market-segment is mainly driven by cost pressures due to its lower-income target group which purchases fashion at a high frequency.
In order to achieve cost efficiencies, H&M outsources the labour-intense production of its products to independent manufacturers in countries like China and Turkey. Location economies that arise from those countries’ endowment of cheap labour are realized this way. Production orders are placed in large scale through 21 wholly-owned production offices to avoid the costs of middlemen (H&M, 2009). Short-term supplier contracts increase H&M’s responsiveness to changes of sourcing conditions and allow constantly sourcing at the lowest price available (H&M 2008a).
Distinctive value-adding core competencies are centralized at the head quarters in Stockholm. For example, collections are designed by around 100 in-house designers, guidelines for store interior designs globally are developed, and over 100 merchandisers structure the product ranges offered in the stores world-wide in Stockholm (Goeransson, Joensson, Persson, 2007; H&M 2009). Outsourcing of production expertise allowed H&M to focus on in-depth knowledge about design, fashion and textiles and thus to lower costs of value creation over time. Hill, Jones, Galvin, & Haidar (2007) refer to this as experience curve effects.
Summary of Chapters
INTRODUCTION: Provides an overview of H&M's history, current global scale, and the research objectives regarding its expansion into Asia.
THE BUSINESS MODEL: Explains the 'fast-fashion' concept and the cost-leadership strategies that underpin H&M's competitive advantage.
EXTERNAL ANALYSIS: Details the market screening process, comparing economic, political, and socio-cultural landscapes in Japan and South Korea.
RECOMMENDATION: Concludes with a strategic roadmap for entering the South Korean market, emphasizing key success factors and first-mover advantages.
Keywords
H&M, Fast-fashion, Market expansion, Japan, South Korea, Cost leadership, Retail industry, Porter's Five Forces, Market screening, Economic development, Consumer behavior, Competitive analysis, Supply chain, Apparel sector, Strategic management.
Frequently Asked Questions
What is the primary focus of this study?
The study evaluates potential expansion opportunities for H&M in Asia, specifically focusing on a comparison between Japan and South Korea to determine the most viable target market.
What are the core themes addressed in the document?
The document covers H&M's business model, economic environments, political and legal barriers, socio-cultural trends, and market competitiveness in the selected Asian regions.
What is the goal of the proposed market entry?
The goal is to identify a market that fits H&M’s business model and offers a favorable risk-to-opportunity ratio, ultimately recommending a strategic entry path.
Which scientific framework is used for the analysis?
The analysis utilizes the market screening process developed by Ball, McCulloch, Geringer, and McNett, and applies Porter’s Five Forces model to assess industry attractiveness.
What does the main body of the document cover?
The main body examines the financial, economic, political, and socio-cultural forces in Japan and South Korea, alongside a detailed competitive analysis of each market.
Which keywords best describe this research?
Key terms include fast-fashion, market expansion, apparel retail, competitive strategy, and country-based market screening.
Why is South Korea favored over Japan in the final recommendation?
South Korea is recommended due to its less restrictive legal and political environment, attractive entry incentives in free economic zones, and a more favorable growth outlook compared to Japan.
What role does E Land play in the analysis?
E Land is identified as a major competitor in South Korea that is planning to launch its own fast-fashion brand, representing a direct threat that necessitates a swift market entry by H&M.
- Quote paper
- Bachelor of Science Sebastian Walter (Author), 2009, Expansion Opportunities for H&M in Asia - Market Analysis, Munich, GRIN Verlag, https://www.grin.com/document/140245
